By exploiting the advantage of being able to buy local currency with a 10% discount, fake users and affiliated stores are introduced to consume local currency, and then the local government receives the discounted amount.
They mobilized 1,300 high school students and earned 475 million won in two months. In particular, since this crime used local currency that adopted the QR code method, an emergency took place in 79 basic organizations nationwide that adopted this method.
The anti-corruption and economic crime investigation unit of the Gyeonggi Southern Police Agency announced on the 3rd that it arrested 20 people, including Mr. A (late 20), who made unfair profits by abusing the local currency 10% discount system, and arrested four key suspects, including Mr. A.
Mr. A and others are under suspicion of hiring 1,300 users from March to May last year, making sales worth 4.7 billion won, and receiving a subsidy equivalent to 10% (violation of the Fraud, Subsidy Management Act, and Local Finance Act).
They targeted the QR code method among the three methods of issuing local currency (paper gift certificate, card type, and QR code). Unlike the paper gift certificate and card type, which must go directly to the store, the QR code method can be used as a mobile payment method anytime, anywhere with only the image of the merchant’s QR code without visiting the store.
According to the police, Mr. A enlisted his acquaintance B (constrained), Chungcheongnam-do gangster C (constrained), and Chungnam local debenturer D (constrained) to register local currency merchants in Ulsan City, Gongju City, Chungnam, and Gimpo City, Gyeonggi Province.
They searched for an vacant shopping mall and made a lease agreement with the owner of the building. Based on this, they received a business registration certificate from the tax office. Afterwards, Mr. A and others recruited 1,300 users, including 200 high school students in the three regions, to purchase local currency with the funds of Mr. D, an unregistered lender, and settle the payment at a false affiliate store. Recruiters from gangsters in the Chungnam and Jeonbuk regions allocate recruiting personnel to subordinate gang members using SNS such as Telegram, and subordinate gang members gather about 10 local junior high school students and install local currency applications on their mobile phones at amusement parks, billiards, and coffee shops. It was installed, and the money sent by Mr. D was used to induce local currency to be purchased and settled. Using this method, Mr. A and others paid 4.75 billion won worth of local currency for two months and received 475 million won, which is 10% of this amount, as a subsidy.
As a result of the police investigation, out of 475 million won, 300 million won was taken by key suspects such as general policy and funding policy, and 170 million won was returned to the subordinates of the recruitment plan. There was no monetary compensation for the students involved in the crime.
The so-called’local money gang’, which aims for profit by reselling local currency issued in the form of paper vouchers in the past, evolved into a new method, causing an emergency for local governments.
According to the Ministry of Public Administration and Security, demand for local currency is increasing every year thanks to discounts (or cashback) of up to 10% of the amount used. From 3714 billion won in 2018 to 2.3 trillion won in 2019 and 9 trillion won last year.
62 places such as Gangwon and Jeonnam are issuing paper gift certificates, 80 places such as Busan and Incheon are card-type, and 79 places such as Seoul and Gyeonggi have adopted and issued QR codes (mobile).
Lee Seung-myeong, second chief of anti-corruption and economic crime investigation at the Gyeonggi Southern Police Agency, said, “In this case, the criminals showed abnormal payment patterns, such as paying the maximum amount to a specific affiliated store,” and “It is necessary to thoroughly monitor these abnormal payment patterns.” said. Manager Lee said, “All three local governments in which ghost merchants are registered registered merchants only with business registration certificates issued by the competent tax office,” and ordered reinforcement of management such as follow-up due diligence.
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